Whether you like it or not, landlords will use your credit history to assess how much financial risk you pose to them. You can rent a house or apartment with bad credit, but you need to know what to expect, and you need to prepare for the obstacles you may face before you submit any applications.
Here are nine ways to boost the chances of your application being accepted.
Look for Landlords Who Don't Do Credit ChecksLarge apartment complexes owned and run by property management companies nearly always conduct a check when you submit an application. If your score is bad, chances are you'll be turned down as a result. As an alternative, try to find an individual landlord, someone you can communicate with directly. Landlords like this are more likely to listen to your situation in a compassionate manner, and not just deny your application because you've got some blemishes on your report.
Know the ScoreYou are entitled to get a free copy of your credit report every 12 months from each of the three major bureaus - Equifax, Experian and TransUnion.
Since your prospective landlord could check any of the reports, it's wise to get a copy of your report from each company. If you spot any inaccurate information or issues that you weren't aware of, at least you are in a position where you can rectify them before submitting an application. The fewer black marks on your report, the more likely it is that your application will be accepted.
Be HonestYour credit report isn't always an accurate reflection of your money management skills. For example, if you lost a job unexpectedly, suffered from a medical emergency or encountered some other financial setback out of your control, your report will more than likely reflect this. That doesn't mean, though, that you pose a much higher risk than someone with a pristine history. That's why it's always good to be honest with any prospective landlord about the information they may find on your report.
If you can show a prospective landlord that you have taken steps to improve your score in recent times, like making payments on time, this will stand in your favor.
Provide ReferencesWritten recommendations go a long way when renting a home with bad credit. They give landlords more information about your financial stability and your personal reliability. Recommendations from previous landlords, employers (past and current) and your bank are worth their weight in gold when accompanying your rental application.
The same goes for letters of recommendation from creditors. If you have an account that you've recently paid off that doesn't yet show on your credit report, a letter from the company confirming this is definitely worth obtaining before a rental application.
Show Steady IncomeA steady income that you can prove (perhaps with a letter from your employer) can be enough to offset a poor history. If your employer can provide a letter outlining your job security, your ability to cover the monthly rent, and your reliability, you will have a very helpful tool in your search for a home to rent. If they are unable to provide such a letter, ask for one that at least states how long you've worked for them and your annual salary.
Ideally, what you pay for housing each month should be no more than one-third of your salary to satisfy your landlord and to assure them that you are in a position to easily meet your monthly commitment.
Find a Guarantor/Co-SignorGetting a parent, relative or trusted friend to co-sign your lease is a great option when renting a home with bad credit. Your co-signer is effectively guaranteeing your lease by committing to cover your monthly payments if you are unable to do so. They need to have good credit and be confident in your ability to cover your agreement.
Complications can arise from this approach if you don't keep up with your payments and your landlord goes after your co-signer for the money. For this reason, you need to be sure you can meet your commitments and think about the potential consequences for your relationship with the co-signer if you screw up.
Pay More Up FrontLandlords get understandably nervous when you've got a poor credit history. It implies that you pose a particular risk and could default on your agreement. You can allay their fears by offering to pay more up front.
Landlords will look favorably on you if you can pay one to three months of rent in advance. They'll be even happier if you can do six months. If that's simply not in your budget, offer to pay a larger security deposit instead. A substantial down payment will show that you are serious about your commitment and willing to prove it from the outset.
Pay via Direct DepositOffering to pay via direct deposit into your landlord's account can also help. A landlord will feel a lot more comfortable knowing that the money is scheduled to automatically come out of your account on the same day each month. Not only does it mean they won't have to chase you for the payment each month, but also that they'll get paid promptly.
Find a RoommateFound the perfect rental home, but your bad credit history is preventing you from pulling the trigger? Why not look for a roommate and have them sign the lease? This option allows you to find a slightly larger property and team up with someone who has a better score than you do to secure it. There's also the added benefit of having someone else to share all the household bills with, saving you money each month – money that you can use to reduce any outstanding debts you have and get your credit score into better shape in the future.